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Michigan eyeing major semiconductor development for Genesee Co. site

Posted By: The Detroit News on September 16, 2024.  For more information, please click here to read the source article.

Michigan Gov. Gretchen Whitmer’s administration is pursuing a major semiconductor manufacturing project that could bring thousands of jobs and billions of dollars in investment to Genesee County, according to five sources with knowledge of an effort that has been unfolding behind the scenes in recent months.

San Jose-based chipmaker Western Digital Technologies Inc. is one company in talks with the state about bringing a microchip production facility to a mega development site in Mundy Township southwest of Flint, according to two sources briefed on the project.

Three sources in and around government described the project as involving 10,000 jobs and tens of billions of dollars in investment — a not-unusual sum for large semiconductor projects. The sources declined to be named because they weren’t authorized to speak publicly about the project.

The situation remains fluid. Michigan officials have been asking some individuals to sign non-disclosure agreements in order to get information about the potential development, known as “Project Grit,” according to the sources.

Two sources said the project appeared to hinge on approval by President Joe Biden’s administration for federal subsidies under the CHIPS Act, a 2022 law designed to lure investment in domestic semiconductor production and lower America’s dependency on foreign-made chips for everything from cars to home appliances. The act featured $39 billion in manufacturing incentives.

If Michigan lands the development this fall, it could have major political implications before the Nov. 5 election between Democratic Vice President Kamala Harris and former President Donald Trump, the Republican nominee. Both candidates have campaigned on an agenda to bring jobs back to the United States that were outsourced overseas in recent decades.

The current administration of Biden and Harris has taken steps to bolster semiconductor manufacturing in the United States and help fund projects with federal tax dollars after automakers lost hundreds of hours of valuable production time in the 2021 chip supply crisis that cost them billions of dollars.

The Mundy Township site is known as the Advanced Manufacturing District of Genesee County, and features 1,300 acres south of Interstate 69. On Sept. 6, Otie McKinley, spokesman for the Michigan Economic Development Corp., said there was no company confirmed for the site at that time.

However, a website sponsored by an organization called Local Jobs for MI has emerged online touting a project in Mundy Township that “promises” “thousands of well-paying, high-tech jobs,” the site says: “Welcome to the future of Mundy Township. This project is an advanced manufacturing facility poised to bring prosperity and innovation to our beloved community.”

Western Digital, a major manufacturer of computer hard drives and portable storage disks and flash drives under the SanDisk brand, registered its CEO, David Goeckeler, to lobby state officials in August, state records show. The company has had an unclear presence in Michigan for two decades, registering in 2001 as a corporation in the state.

Western Digital reported spending $15,757 lobbying Michigan officeholders over the first seven months of 2024. The company did not respond Monday to messages seeking comment.

Whitmer’s office also did not respond to a message seeking comment.

‘Hopefully soon’

Sen. John Cherry, D-Flint, said he is aware the Michigan Economic Development Corp. is “aggressively pursuing” investments for the Mundy Township site. But since the Genesee County lawmaker has not signed a non-disclosure agreement he has not been briefed on details of which company is being pursued.

“I don’t think that there’s a deal that’s been nailed yet,” Cherry said. “But hopefully soon.”

But officials have been hinting for weeks a major economic development project is in the works that could have national and international implications.

Last month, Tyler Rossmaessler, executive director of the Flint and Genesee Economic Alliance, told the Genesee County Metropolitan Planning Commission that officials were pursuing a “transformational type of investment” that would bring “thousands of jobs” to the county. He said the project would make the nation “less reliant on foreign countries.”

“This project will look and feel much like a high-tech college campus and will provide incredible opportunities for Genesee County,” Rossmaessler told the commission, according to meeting minutes.

Patrick Anderson, CEO of East Lansing-based Anderson Economic Group, said the state “should be competing for high-tech electronics and component manufacturers, including ‘chip’ builders, especially if they are bringing manufacturing back from overseas” and are cooperating with United States allies in Taiwan and Europe.

“This is an essential part of the automobile industry,” Anderson said of microchip production, “and almost every other industry involving manufactured products and Michigan should be a player.”

The site

Mundy Township touches the southwest side of Flint, where William Durant formed General Motors in 1908. Flint has long been part of GM’s manufacturing prowess and is still home to the profit-rich heavy-duty truck plant along Interstates 75 and 69 where about 4,600 work. But the area has also faced punishing economic loss, especially after GM closed its storied Buick City complex in the late 1990s. That plant once employed as many as 27,000 workers.

“That area of Michigan is where General Motors was founded and which used to be one of the main manufacturing centers in the entire United States,” Anderson said. “It’s lost an incredible number of jobs over the last few decades, but it still has the rail and highway network and it’s still connected to the Detroit area, and it would be an ideal place to rebuild a new industrial center.”

In May, the Michigan Strategic Fund board approved a $250 million grant to prepare a large site in Mundy Township, which sits about 10 miles southwest of Flint. At the time, officials said attracting a high-tech company to the site could result in an investment exceeding $2 billion and create more than 2,000 direct jobs.

“It’s much more than a one-time benefit,” Rossmaessler told the board in May. “Developing this site will bring an advanced manufacturer to Genesee County, and that will mean thousands of new jobs, opportunities for young people so they can grow and build a life here.”

When the Flint and Genesee Economic Alliance approached state lawmakers in June for the final sign-off on the $250 million grant, officials said they were in discussion with several parties interested in the site. They declined to identify those companies.

The $250 million state grant was meant to help purchase and demolish dozens of properties — including an elementary school and church — to assemble the 1,300-acre tract of land. The property, one of the largest industrial sites in the state, is near Flint’s Bishop International Airport and is bordered by Hill, Elms, Maple and Jennings roads.

The site has nearby access to the Genesee County water and wastewater systems, which use water from Lake Huron through the Karegnondi Water Authority’s pipeline. The MEDC also said the electrical and gas demands of a development at the site could be met by current suppliers, with Consumers Energy able to supply 1,300 megawatts within three years.

Separately, the Michigan Legislature has appropriated $10 million for job training in the semiconductor industry to develop a pipeline of skilled workers.

‘There is demand’

On July 28, 2022, Western Digital issued a statement saying the CHIPS Act would “help accelerate strategic investments in the next generation of advanced technology innovation and development.”

“We are pleased that Congress and the Biden administration have made the CHIPS Act a priority,” said Goeckeler, the CEO. “Passage of this legislation is an important step towards strengthening the United States’ leadership in the memory and data storage sectors of the semiconductor industry.”

The federal government has been pushing for domestic chip production expansion since automakers and tech companies battled a global semiconductor shortage after the pandemic caused major supply constraints.

One key factor: much of the chip manufacturing is centralized in Taiwan and other parts of Asia. The lack of supply diversification made access difficult during a period of heightened demand during the pandemic. Automakers, forced to shut down for eight weeks as the pandemic hit, had also jumped out of line for the supply, so the chip manufacturers switched to focusing on tech products.

“Their chip capacity went to higher-profit, higher-volume chips rather than lower-profit, automotive ones,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions LLC.

The chip supply crisis has eased, but there remains some “spotty disruption,” said Dan Hearsch, global consulting firm AlixPartners’ Americas co-leader of automotive and industrial practice. There’s been about a 20% boost in production capacity since 2021 for chips used in the auto industry and a much higher increase in capacity for the more advanced chips. But more production is needed.

“Certainly, there is demand for those chips,” said Hearsch, and it’s beneficial to have distributed supply since “everything being so concentrated in one place was a big problem.”

Boosting production of chips “is absolutely going to be necessary,” Fiorani said. “The continual shift towards computerization of vehicles will require more and more chips going forward.”

Chasing projects

The state’s pursuit of the new investment this year comes after Michigan officials in 2022 lost a huge semiconductor development to Syracuse, New York.

The state offered Idaho-based Micron Technology about $4 billion in direct incentives for Micron, its suppliers, site preparation and job training, according to records obtained by The News. The state also offered an additional 50-year property tax break amounting to about $23.8 billion.

All told, the direct and indirect taxpayer cash and the half-century-long tax break amounted to at least $27.9 billion in incentives for an effort dubbed “Project Copper” that was intended for a megasite in Eagle Township, near Lansing.

A few weeks after Michigan made its offer, Micron announced it would locate its $100 billion, 9,000-job semiconductor project in New York, a state offering the company $5.5 billion in incentives over the 20-year construction period. The 9,000 workers hired over the 20 years are expected to earn an average annual salary of about $100,000.

By comparison, the projects Michigan has landed in recent years through its large-scale business attraction program — the Strategic Outreach and Attraction Reserve fund — have been much smaller than the hoped-for Micron investment.

The projects the state did secure through SOAR include a $2.3 billion Gotion Inc. battery parts plant in Big Rapids and a $6.5 billion General Motors Co. electric vehicle expansion of its Orion Township plant and construction of an electric vehicle battery plant in the Lansing area. Gotion received about $175 million in direct incentives, while GM received $666 million in direct incentives for its EV manufacturing investments in Michigan.

Chip manufacturing plants are known to require exceptionally high investment amounts. Ohio’s largest single private-sector investment in the state’s history came from tech giant Intel Corp. in 2022 when the company announced a more than $20 billion initial investment to build two new chip factories in the New Albany area, which is about 20 minutes from Columbus.

The project is expected to create 3,000 jobs initially and 7,000 construction jobs. The 1,000-acre megasite in Licking County where the plants are located can accommodate a total of eight chip factories, according to a press release announcing the investment. Intel broke ground on the project in September 2022.

Production was originally set to come online next year, but delays pushed back completion of the project to 2026-27 and production launch to 2027-28, the Newark Advocate reported Sept. 9, the anniversary of the 2022 Intel groundbreaking ceremony.

The U.S. Department of Commerce and Intel in March 2024 announced the company would receive up to $8.5 billion in proposed funding for commercial semiconductor projects, including its coming Ohio facilities. Intel is receiving more than $2 billion in state and local incentives, the Columbus Dispatch reported in March.